Fair Tax Article

I know several folks on here have talked about this before so figured you might be interested in the article

Fervent faith in Fair Tax defies reason

Published on: 04/23/07

I wouldn't want to accuse Georgia's Fair Tax movement of being a cult, but it does have a disturbing number of cult-like attributes. Among other things, its adherents display an almost religious fervor for their cause, to the point that they become blind to the obvious irrationality of claims that are made on its behalf.

The prime advocate of the Fair Tax in Congress, U.S. Rep. John Linder (R-Ga.), claims the tax will do away with "all personal income taxes, corporate income taxes, payroll taxes, self-employment taxes, capital gains taxes and gift and estate taxes." Instead, those taxes will be replaced with a retail sales tax of 30 percent on all services and new goods.

Among other benefits, Linder claims that adopting the Fair Tax will drive down retail prices by 20 percent to 30 percent. That price drop would almost completely offset the Fair Tax's 30 percent sales tax, meaning that in effect, we could run the federal government for free.

But wait! If you act now, Linder will also throw in a 10.5 percent increase in the nation's gross domestic product the very first year the Fair Tax is in place. And as a special bonus, interest rates would also fall by 20 to 30 percent.

Linder and other Fair Tax advocates, including talk radio host Neal Boortz, make two other promises as well. First, they say, the Fair Tax will be revenue-neutral, generating just as much money as the current system.

Second, they promise that the Fair Tax will not shift the tax burden onto low-income households, as sales taxes usually do. To their credit, they make an honest effort to achieve that goal, using a monthly check to compensate low-income households for the higher sales tax they would pay.

But let's review. Under the Fair Tax, low-income Americans won't pay taxes; corporations won't pay any taxes either. Yet the Fair Tax is guaranteed to generate the same amount of revenue as today's system. Basic arithmetic requires that somebody's taxes increase. Who will that somebody be?

For example, would it be a typical middle-class two-income Georgia family with two kids, a mortgage and college tuition payments? As it happens, I have access to the tax returns of just such a family.

At www.fairtax.org, the main Web site of the Fair Tax movement, I plugged the Bookman family financial data into the FairTax calculator. The model reported that the Fair Tax would save me $7,500.

Suddenly, the Fair Tax didn't seem such a bad idea.

Still, the mystery remained: If the middle class pays less, and corporations and poor people don't pay anything at all, who pays more? The rich? That didn't seem likely given Republican enthusiasm for the Fair Tax, but again I turned to the FairTax calculator for help.

As it happens, I also had access to the 2006 tax return of a rather wealthy couple who reported an adjusted gross income of $765,801 and paid $203,021 in federal taxes. What would this couple, a certain George and Laura Bush, pay under the Fair Tax?

Plugging their data into the calculator, I learned that the Fair Tax woud cut their federal tax burden by $74,596.

I then began to punch invented numbers into the model, determined to find somebody, even a theoretical somebody, who would pay more. A family with $1.5 million in income, with a $4.5 million mortgage? Nope. Under the Fair Tax, they would save $436,624.

Finally, I hit paydirt. It turns out that a married couple with two children who rented their home and made $40,000 would, under the Fair Tax, pay $860 a year more in taxes than they do today.

Somehow, I doubt that will be enough to make the concept revenue-neutral.

In 2005, a panel appointed by President Bush to study proposed changes in the federal tax system reached the same conclusion, though its process was more sophisticated. It found that eliminating just the federal income tax â€” leaving payroll taxes, estate taxes and gift taxes in place â€” would require a retail sales tax of at least 34 percent. As it noted, "no state or country has ever levied a retail sales tax at a tax rate that even approaches the 34 percent required to replace the federal income tax system."

The panel also reported that replacing the income tax with a 34 percent sales tax would reduce taxes on just two groups â€” households making more than $200,000, and those making less than $30,000. For everyone else, the tax burden would increase.

Unfortunately, such data don't seem to penetrate the cult. A core of Georgia Republican Party activists has completely embraced the Fair Tax, and GOP elected officials have done so as well. Every Georgia Republican in Congress is a co-sponsor of Fair Tax legislation, as are both U.S. senators. The fever is spreading to the state Legislature, where House Speaker Glenn Richardson is touting his radical tax-reform measure as a state version of the Fair Tax.

I have never been a Bortz fan, I have always looked at him as you would a comedy routine. He is just for entertainment and not to be taken too seriously.
My grandad would tell me " anything that looks to good to be true......" well, you fill in the blanks.
Fair Tax, Sounds like an oxmoron. I don't think there is anything fair about taxation.
My $.02.

I always liked the idea of the fair tax for the transparency it provides. Not only would it simplify the tax code, but it would make the cost of government much more visible. Too many people think they don't pay taxes now because they "get money back".

I am in favor of a national sales tax but I am fuzzy on how the details would best be worked out.

the reason I like the national sales tax is it would catch more illegals and visitors and make them pay. Also as someone who is in the business of preparing taxes you would be amazed how many "poor" folks cheat the system.

Of course I would then lose the best parttime job in the world but oh well!

I'm completely against any Flat-Tax, because it would simply return to the current system. Our current income tax system was originally a flat-tax system against "the rich". Politicians slowly added "exceptions" and "slight changes" over the years to please various constituencies. Look where it got us now.

Personally, I don't think we'll ever see the current income tax system simplified or removed. Too many accountants and lawyers depend on their skills at deciphering the arcane insanities of the current code for a reform to be allowed to pass.

I am in favor of a national sales tax but I am fuzzy on how the details would best be worked out.

the reason I like the national sales tax is it would catch more illegals and visitors and make them pay. Also as someone who is in the business of preparing taxes you would be amazed how many "poor" folks cheat the system.

Of course I would then lose the best parttime job in the world but oh well!

Click to expand...

I think you hit it pretty close, if not right on. Gone are the "earned income" credits, and all the other perks for not making any money, gone are the "tax shelters" for those that can afford a horse farm in Kentucky, and a vacation home in Vale. Everyone pays into it, it's only the poor that get a refund of their sales tax. Think about it. Everything you buy will be taxed. People generally live UP to their income, meaning, the more they have, the more they spend, and therefore the more they are taxed. I think the key is that EVERYONE will have to pay. Illegals, low income, middle income, high income. Everyone eats, everyone pays taxes on that. No more free rides.

It is astonishing how the detractors such as Bookman have to lie to prove their point.

- You are already paying 22% in hidden federal tax. The cost of goods and services will not increase they will remaine the same. A $100 dollar purchase now will still cost $100 after the Fair Tax. $75 cost + $25 tax = $100.

- Goods will only be taxed once not every time they are sold. Wanna buy a new car? Pay the tax. Wanna buy a used car? NO tax.

Get the FairTax book by Linder/Boortz. It's an easy read and explains all. See if your library has it. Get the second edition.

Is any tax reform plan perfect? Of course not. Can't happen. I doubt that there is a way to devise a perfect plan for the government to seize money from its subjects, either through force, such as the income tax, or through choice, such as with a sales tax, in a perfect way. Certainly nobody, not even the most fervent big-government socialist liberal, would say that our current income tax system is anywhere near perfect.

Lacking perfection, it is inevitable, then, that any tax reform proposal would escape criticism, and there are criticisms of the FairTax that need addressing. To that end Congressman John Linder and I are now working on a sequel to The FairTax Book. The new book will be called "The FairTax, Answering the Critics." In researching for this book we have gathered letters from politicians as well as private citizens, tax policy experts, government officials, elected representatives, academicians, think tanks and, of course, those crafters of public opinion --- the pundits.

Work on the new book has shown that critics of The FairTax can be divided into two groups; those who deal with the subject honestly, and those who do not. Perhaps we shouldn't have been, but we were amazed to discover that most --- not some, but most --- of the critics of The FairTax have to first lie about the proposal before they launch into their critique. Amazingly enough, the president's tax reform commission took just such a tact. In laymen's terms, the tax reform commission said that while the FairTax idea looks good, there is no way the congress would pass it as written. So the commission then proceeds to re-write the FairTax legislation into a form that it thought the congress might actually pass, and then proceeded to criticize it.

The FairTax is the most thoroughly researched piece of tax reform legislation ever presented to the U.S. Congress. Well over $20 million has been spent on economic and sociological research in putting this plan together, and the research continues to this day. Still, though, we have a tax reform proposal that actually transfers power to the people, and this is just not to be tolerated -- especially by the left. So the procedure is to develop a list of lies and half-truths about the FairTax and then use those lies to go on the attack.

Such is the path that was taken in today's Atlanta Journal-Constitution by Jay Bookman, the deputy editorial page editor. Bookman is a fervent liberal, a huge believer in the cause of big government. Perhaps he's most troubled by the fact that the FairTax would constitute the biggest transfer of power from the government to the people since the formation of this country. He also may be upset that if the FairTax were to become the law of the land politicians would no longer be able to pursue their class warfare goals through tax policy. With the FairTax Jay Bookman would no longer be able to write opinion pieces relating to tax matters with constant references to "the richest 1%" and phrases like "pay their fair share."

So ... why pick on Jay Bookman today? Because he has a column in today's AJC entitled "Fervent faith in FairTax defies reason." First, a small critique. It's "FairTax." One word .. with the F and the T capitalized. No big deal? Well, you could actually read the bill or the book and discover this fact, or a few Google clicks. Besides .. the name is trademarked. I'm sure Mr. Bookman has a great fondness for accuracy .. so this should matter to him.

Wait! Did I say Jay Bookman had a fondness for accuracy? Sorry. By the second paragraph of his column we find out that this is not so. There he is, doing what so many other critics of the FairTax have done, blatantly lying about its terms. Bookman writes "Instead, those taxes will be replaced with a retail sales tax of 30 percent on all services and new goods."

That is flat-out wrong, and he knows it to be flat-out wrong. Bookman has adopted the "first lie, then critique" policy of the FairTax opponents. The FairTax is a 23% inclusive tax, not 30%. The FairTax is a replacement for the income tax, so it is calculated using the same methods we use to calculate the income tax. You know --- comparing apples to apples and all that? I wonder if someone would do me the favor of researching the writings of one Jay Bookman to find out if he ever quotes our income tax on an exclusive basis. If he did, he would find out that the top rate is somewhere well over 50%. But wait! He likes the income tax, so those figures will be reported honestly.

The problem here is that you just know that if a critique of the FairTax contains a blatant and intentional misrepresentation in the second paragraph, there is not much that will follow that can be treated seriously. Sure enough ... in the very next paragraph Bookman says that Congressman Linder has claimed that the FairTax would force prices down by as much as 30%. Wrong again. That figure is closer to 22%.

And so it goes. Misrepresent, then attack. The tactics of the left.

Hey ... here's an idea! I'm up for a fight right now. How about a public debate somewhere? Jay Bookman and me! Look, I've debated Yale tax law professors and former deputy assistant Treasury secretaries on the FairTax, I think I might be able to stand up pretty well against a deputy editorial page editor who finds it necessary to lie about an idea before he can criticize it.

Date and time? We'll work it out!

By the way .... don't forget we're going to have a huge FairTax Rally in Columbia, South Carolina on the evening of May 15th. Details to follow

I've been on board with it ever since I heard about the idea from Boortz & did a little research on the topic. The above was the first I have heard about a 2nd book though. That will be good. The more the message gets out the more chance we have of forcing the Congress to "just do it".